Audited Financial Statements And Other Financial Information. City of Clinton, North Carolina. As of June 30, 2016

Transcription

1 Audited Financial Statements And Other Financial Information City of Clinton, North Carolina As of June 30, 2016 City Council Members Mr. Lew Starling, Mayor Ms. Maxine Harris, Mayor Pro-Tem Mr. Steve Stefanovich Mr. Neal Strickland Rev. Marcus Becton Ms. Jean Turlington Administrative and Financial Staff Mr. Shawn Purvis, City Manager Mrs. Kristin Stafford, Finance Director DENNING, HERRING, SESSOMS & COMPANY, PA CERTIFIED PUBLIC ACCOUNTANTS CLINTON, NORTH CAROLINA

2 City of Clinton, North Carolina Table of Contents Exhibit Financial Section: Page Independent Auditor s Report 1-3 Management s Discussion and Analysis 4-17 Basic Financial Statements: Government-wide Financial Statements: 1 Statement of Net Position 18 2 Statement of Activities 19 Fund Financial Statements: 3 Balance Sheet Governmental Funds 20 3 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 4 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 4 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 5 Statement of Revenues, Expenditures, and Changes in Fund Balances Annual Budget and Actual General Fund Statement of Fund Net Position Water and Sewer Fund 25 7 Statement of Revenues, Expenses, and Changes in Fund Net Position Water and Sewer Fund 26 8 Statement of Cash Flows Water and Sewer Fund Notes to the Financial Statements 29-63

3 Exhibit City of Clinton, North Carolina Table of Contents Required Supplemental Financial Data: Page A-1 Law Enforcement Officers Special Separation Allowance Schedule of Funding Progress A-2 Other Postemployment Benefits Schedule of Funding Progress A-3 Schedule of the Proportionate Share of the Net Pension Asset-Local Government Employees Retirement System A-4 Schedule of Contributions-Local Government Employees Retirement System A-5 Secondary Market Disclosure 68 Individual Fund Statements and Schedules: B-1 Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund C-1 Combining Balance Sheet for Non-Major Governmental Funds C-2 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance for Non-Major Governmental Funds C-3 Combining Balance Sheet for Special Revenue Funds 76 C-4 Combining Statement of Revenues, Expenditures and Changes in Fund Balances for Special Revenue Funds 77 C-5 Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Community Development Fund 78 C-6 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Downtown Tax District Fund 79 C-7 Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Planning Grants Fund 80

4 Exhibit City of Clinton, North Carolina Table of Contents Individual Fund Statements and Schedules (continued): Page C-8 Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Fire Department Grant Fund 81 C-9 Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Open Space Fund 82 C-10 Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Main Street Solution Grant 83 C-11 Combining Balance Sheet for Capital Project Funds 84 C-12 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances for Capital Project Funds 85 C-13 Statement of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual-From Inception- City Facility Renovations 86 C-14 Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual From Inception Affordable Housing Project 87 C-15 Statement of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual-From Inception-ACE Parking Lot Project 88 C-16 Statement of Revenues, Expenditures and Changes in Fund Balance-Budget and Actual-From Inception-Phase 1A PARTF Project D-1 Schedule of Revenues and Expenditures-Budget and Actual-Water and Sewer Fund D-2 Statement of Revenues, Expenditures and Changes in Budget and Actual-From Inception-Capital Project- Water Production Expansion 92 D-3 Statement of Revenues, Expenditures and Changes in Budget and Actual-From Inception-Capital Project- Southwood Elevated Tank Project 93 D-4 Statement of Revenues, Expenditures and Changes in Budget and Actual-From Inception-Capital Project-NC 24 Industrial Park Infrastructure Project 94

5 City of Clinton, North Carolina Table of Contents Exhibit Individual Fund Statements and Schedules (continued): Page D-5 Statement of Revenues, Expenditures and Changes in Budget and Actual-From Inception-Capital Project- Hwy 24 Infrastructure Relocation 95 D-6 Statement of Revenues, Expenditures and Changes in Budget and Actual-From Inception-Capital Project- Waterline Improvements 96 D-7 Statement of Revenues, Expenditures and Changes in Budget and Actual-From Inception-Capital Project- Water & Sewer Capital Reserve Fund 97 D-8 Statement of Revenues, Expenditures and Changes in Budget and Actual-From Inception-Capital Project- WWTP Expansion 98 Other Schedules: E-1 Schedule of Ad Valorem Taxes Receivable 99 E-2 Analysis of Current Tax Levy City-Wide Levy 100 Compliance Section: Independent Auditor s Report On Internal Control Over Financial Reporting And On Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Government Auditing Standards Schedule of Findings and Questioned Costs 103 Summary Schedule of Prior Audit Findings 104

6 Denning, Herring, Sessoms & Company, P.A. Certified Public Accountants Clinton, NC J. ANTHONY SESSOMS, CPA 1905 SUNSET AVENUE BOBBY W. HERRING JR, CPA P.O. BOX 2185 JULIA B. HARRISON, CPA (910) PAULA M. CRUMPLER, CPA FAX (910) To the Honorable Mayor And Members of the City Council Clinton, NC Report on the Financial Statements Independent Auditor s Report We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Clinton, North Carolina as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The financial statements of the Clinton ABC Board were not audited in accordance with Governmental Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AND NORTH CAROLINA ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS D H S

7 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Clinton, North Carolina, as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis on pages 4-17, the Law Enforcement Officers Special Separation Allowance s and the Other Post Employment Benefit s Schedules of Funding Progress and Employer Contributions on pages 64 and 65, respectively and the Local Government Employees Retirement System Schedules of the Proportionate Share of Net Pension Liability (Asset) and Contributions on pages 66-67, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Clinton, North Carolina s basic financial statements. The combining and individual fund statements, budgetary schedules and other schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements, budgetary schedules, and other schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

8 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November , on our consideration of the City of Clinton, North Carolina s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Clinton, North Carolina s internal control over financial reporting and compliance. Denning, Herring, Sessoms & Company, P.A. Denning, Herring, Sessoms & Company, P.A. Clinton, NC November 22, 2016

9 Financial Section

10 Management Discussion and Analysis

11 Management s Discussion and Analysis As management of the City of Clinton, we offer readers of the City of Clinton s financial statements this narrative overview and analysis of the financial activities of the City of Clinton for the fiscal year ended June 30, We encourage readers to read the information presented here in conjunction with additional information that we have furnished in the City s financial statements, which follow this narrative. Financial Highlights The assets and deferred outflows of resources of the City of Clinton exceeded its liabilities and deferred inflows of resources at the close of the fiscal year by $33,797,968 (net position). The assets of the governmental activities exceeded its liabilities by $13,879,105. The assets of the business-type activities exceeded liabilities by $19,918,863. The government s total net position increased by $722,374 primarily due to increases in the governmental activities net position. Business-type net position increased $128,008 and net position for governmental activities increased $594,366. As of the close of Fiscal Year 2016, the City of Clinton s governmental funds reported combined ending fund balances of $6,225,451 with a net change of $431,639 in fund balance. Approximately 23% of this total amount, or $1,453,389, is non-spendable or restricted. At the end of the current fiscal year, unassigned fund balance for the General Fund was $3,699,849 or 40% of total general fund expenditures for the fiscal year. Total fund balance for the General Fund was $5,898,896 (64%). The City of Clinton s total debt decreased $30,389 (0.66%) during the past fiscal year, due to repayment of existing debt obligations in both business-type and governmental activities. Clinton currently does not have a bond rating as the City retired all bond-related debt during FY The City s most recent credit rating was A+ from Standard & Poor's and A3 from Moody's Investors and 82 from the North Carolina Municipal Council. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to City of Clinton s basic financial statements. The City s basic financial statements consist of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements (Figure 1). The basic financial statements present two different views of the City through the use of government-wide statements and fund financial statements. In addition to the basic financial statements, this report contains other supplemental information that will enhance the reader s understanding of the financial condition of the City of Clinton. 4

12 Management Discussion and Analysis City of Clinton Required Components of Annual Financial Report Figure 1 Management s Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Basic Financial Statements Summary Detail The first two statements (Exhibits 1 and 2) in the basic financial statements are the Governmentwide Financial Statements. They provide both short and long-term information about the City s financial status. The next statements (Exhibits 3 through 8) are Fund Financial Statements. These statements focus on the activities of the individual parts of the City s government. These statements provide more detail than the government-wide statements. There are three parts to the Fund Financial Statements: 1) the governmental funds statements; 2) the budgetary comparison statements; and 3) the proprietary fund statements. The next section of the basic financial statements is the notes. The notes to the financial statements explain in detail some of the data contained in those statements. After the notes, supplemental information is provided to show details about the City s individual funds. Budgetary information required by the General Statutes also can be found in this part of the statements. 5

13 Management Discussion and Analysis City of Clinton Government-Wide Financial Statements The government-wide financial statements are designed to provide the reader with a broad overview of the City s finances, similar in format to a financial statement of a private-sector business. The government-wide statements provide short and long-term information about the City s financial status as a whole. The two government-wide statements report the City s net position and how it has changed. Net position is the difference between the City s total assets and deferred outflows of resources and total liabilities and deferred inflows of resources. Measuring net position is one way to gauge the City s financial condition. The government-wide statements are divided into three categories: 1) governmental activities; 2) business-type activities; and 3) component units. The governmental activities include most of the City s basic services such as public safety, parks and recreation, sanitation, and general administration. Property taxes and intergovernmental revenues finance most of these activities. The business-type activities are those that the City charges customers to provide. These include the water and sewer services offered by the City of Clinton. The final category is the component unit. Although legally separate from the City, the ABC Board is important to the City. The City exercises control over the Board by appointing its members. The Board is required to distribute its profits to the City. The government-wide financial statements are on Exhibits 1 and 2 of this report. Fund Financial Statements The fund financial statements provide a more detailed look at the City s most significant activities. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Clinton, like all other governmental entities in North Carolina, uses fund accounting to ensure and reflect compliance (or non-compliance) with finance-related legal requirements, such as the General Statutes or the City s budget ordinance. All of the funds of the City of Clinton can be divided into two categories- governmental funds and proprietary funds. Governmental Funds Governmental funds are used to account for those functions reported as governmental activities in the government-wide financial statements. Most of the City s basic services are accounted for in governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what monies are left at year-end that will be available for spending in the next year. Governmental funds are reported using an accounting method called modified accrual accounting, which provides a short-term spending focus. As a result, the governmental fund financial statements give the reader a detailed short-term view that helps him or her determine if there are more or less financial resources available to finance the City s programs. The relationship between government activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is described in a reconciliation that is a part of the fund financial statements. The City of Clinton adopts an annual budget for its General Fund, as required by the General Statutes. The budget is a legally adopted document that incorporates input from the citizens of the City, the management of the City, and the decisions of the Council about which services to provide and how to pay for them. It also authorizes the City to obtain funds from identified sources to finance these current period activities. The budgetary statement provided for the General Fund demonstrates how well the City complied with the budget ordinance and whether or not the City succeeded in providing the services as planned when the budget was adopted. The budgetary comparison statement uses the budgetary basis of accounting and is presented using the same format, language, and 6

14 Management Discussion and Analysis City of Clinton classifications as the legal budget document. The statement shows four columns: 1) the original budget as adopted by Council; 2) the final budget as amended by Council; 3) the actual resources, charges to appropriations, and ending balances in the General Fund; and 4) the difference or variance between the final budget and the actual resources and charges. Proprietary Funds The City of Clinton has one proprietary fund, an enterprise fund, which is used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses an enterprise fund to account for its water and sewer activities. This fund is the same as the function shown in the business-type activities in the Statement of Net Position and the Statement of Activities. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements begin on page 29 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report includes certain required supplementary information concerning the City of Clinton s progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found beginning on page 64 of this report. Interdependence with Other Entities The City depends on financial resources flowing from, or associated with, both the federal government and the State of North Carolina. Because of this dependency, the City is subject to changes in specific flows of intergovernmental revenues based on modifications to federal and State laws and federal and State appropriations. It is also subject to changes in investment earnings and asset values associated with U.S. Treasury Securities because of actions by foreign governments and other holders of publicly held U.S. Treasury Securities. (continued on next page) 7

15 Management Discussion and Analysis City of Clinton Government-Wide Financial Analysis Figure 2 City of Clinton s Net Position Governmental Activities Business-type Activities Total Current and other assets $ 6,733,181 $7,026,193 $ 3,627,319 $ 4,047,622 $10,360,500 $11,073,815 Capital assets 12,044,910 11,744,258 20,434,805 20,608,737 32,479,715 32,352,995 Deferred outflows of resources 251, ,053 84,702 82, , ,633 Total assets & deferred outflows of resources 19,029,245 19,034,504 24,146,826 24,738,939 43,176,071 43,773,443 Long-term liabilities outstanding 3,948,712 3,220,559 3,366,070 3,353,403 7,314,782 6,573,962 Other liabilities 985,786 1,399, ,013 1,312,194 1,775,799 2,711,454 Deferred inflows of resources 215,642 1,129,946 71, , ,523 1,412,433 Total liabilities & deferred inflows of resources 5,150,140 5,749,765 4,227,964 4,948,084 9,378,104 10,697,849 Net position: Invested in capital assets, net of related debt 9,128,220 9,043,351 17,341,234 17,367,910 26,469,454 26,411,261 Restricted 1,261,906 1,188, ,261,906 1,188,370 Unrestricted 3,488,979 3,053,018 2,577,629 2,422,945 6,066,608 5,475,963 Net position before restatement Total net position after restatement $13,879,105 $13,284,739 $19,918,863 $19,790,855 $33,797,968 $33,075,594 8

16 Management Discussion and Analysis City of Clinton Figure 3 City of Clinton FY2016 Total Net Position by Type Invested in capital assets 80% Restricted 4% Unrestricted 18% As noted earlier, net position may serve over time as one useful indicator of a government s financial condition. The assets and deferred outflows of the City of Clinton exceeded liabilities and deferred inflows by $33,797,968 as of June 30, The City s net position increased by $722,374 for the fiscal year ended June 30, The largest portion of net position (78.3%) reflects the City s net investment in capital assets (e.g. land, buildings, machinery, and equipment). The City of Clinton uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Clinton s net investment in its capital assets is reported net of the outstanding related debt, the resources needed to repay that debt must be provided by other sources, since the capital assets cannot be used to liquidate these liabilities. An additional portion of the City of Clinton s net position, $1,261,906 (3.7%), represents resources that are subject to external restrictions on how they may be used. The remaining balance of $6,066,608 is unrestricted. Several particular aspects of the City s financial operations positively influenced the total unrestricted governmental net position: Continued diligence in the collection of property taxes by maintaining a tax collection percentage of 98.63% (98.5% excluding motor vehicles). Collection of ad valorem tax levies of approximately $63,304 more than original projections, primarily due to the State s implementation of the tax and tag legislation. Unrestricted intergovernmental revenues increased 5% Continued low cost of debt due to the City s strong financial position. 9

17 Management Discussion and Analysis City of Clinton Figure 4 City of Clinton s Changes in Net Position Governmental Activities Business-type Activities Total Revenues: Program revenues: Charges for services $1,604,089 $1,579,522 $4,656,158 $4,575,806 $6,260,247 $6,155,328 Operating grants and contributions 707, , , ,305 Capital grants and contributions 200, , , , ,131 General revenues: Property taxes 2,920,966 2,882, ,920,966 2,882,836 Other taxes 45,528 54, ,528 54,742 Unrestricted intergovernmental revenues 3,643,670 3,472, ,643,670 3,472,825 Unrestricted investment earnings 14,212 13,187 9,117 8,478 23,329 21,665 Miscellaneous - 38,475 45,602 38,475 45,602 Sale of surplus assets (loss) (23,722) 5,872-3,194 (23,722) 9,066 Total revenues 9,112,179 8,758,289 4,850,054 5,131,211 13,962,233 13,889,500 Expenses: General Government 1,596,886 1,573, ,596,886 1,573,575 Public safety 3,510,690 3,510, ,510,690 3,510,291 Transportation 1,198,225 1,187, ,198,225 1,187,599 Economic and physical development 439, , , ,429 Environmental protection 819, , , ,982 Cultural and recreation 883, , , ,799 Interest on long-term debt 70,022 83, ,022 83,559 Water and Sewer - - 4,722,046 4,322,790 4,722,046 4,322,790 Total expenses 8,517,813 8,279,234 4,722,046 4,322,790 13,239,859 12,602,024 Increase (decrease) in net position before transfers 594, , , , ,374 1,287,476 Transfers - 1,600 - (1,600) - - Increase in net position 594, , , , ,374 1,287,476 Net position, July 1 13,284,739 13,442,257 19,790,855 19,146,105 33,075,594 32,588,362 Net position, beginning restated - 12,804,084-18,984,034-31,788,118 Net position, June 30 $ 13,879,105 $13,284,739 $19,918,863 $19,790,855 $33,797,968 $ 33,075,594 10

18 Management Discussion and Analysis City of Clinton Governmental Activities. Governmental activities increased the City s net position by $594,366, thereby increasing the overall increase in the net position of the City of Clinton. Key elements of this increase are as follows: Revenues increased by $353,890 with the most significant increases in unrestricted intergovernmental, unrestricted investment earnings, and charges. Figure 5 Revenues by Source: Governmental Activities Sales & Services 15.9% Unrestricted Intergov't 39.7% Ad Valorem Taxes 32.2% Misc. 2.5% Restricted Intergov't 9.0% Other Taxes 0.5% Investment Earnings 0.2% Business-type Activities. Business-type activities increased the City of Clinton s net position by $128,008. Key elements of this increase are as follows: Decrease in debt service reduced liabilities Installation and upgrades of utility lines increased operating revenues 11

19 Management Discussion and Analysis City of Clinton Figure 6 Revenues by Source: Business-type Activities Charges for Services 89.2% Investment Earnings 0.2% Grants & Contributions 9.7% Other Operating 1.0% Financial Analysis of the City s Funds As noted earlier, the City of Clinton uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. The focus of the City of Clinton s governmental funds is to provide information on near-term inflows, outflows, and balances of usable resources. Such information is useful in assessing the City of Clinton s financing requirements. The General Fund is the chief operating fund of the City of Clinton. At the end of the current fiscal year, Clinton s fund balance unassigned in the General Fund was $3,699,849, while total fund balance was $5,898,896. The Clinton City Council has determined that the City should maintain an available fund balance between 35% and 40% of General Fund expenditures in case of unforeseen needs or opportunities, in addition to meeting the cash flow needs of the City. The City currently has an available (unassigned and assigned) fund balance of 47% of General Fund expenditures, while total fund balance represents 63.7% of the same amount. The City considers any available fund balance over 40% assigned for capital expenditures. At June 30, 2016, the governmental funds of City of Clinton reported a combined fund balance of $6,225,451 with a net increase in fund balance of $431,639. Included in this change in fund balance is a $277,074 increase in fund balance in the General Fund and a $154,565 increase in Non-major Funds. General Fund Budgetary Highlights. During the fiscal year, the City revised the budget on several occasions. Generally, budget amendments fall into one of three categories: 1) amendments made to adjust the estimates that are used to prepare the original budget ordinance once exact information is available; 2) amendments made to recognize new funding amounts from external sources, such as Federal and State grants; and 3) increases in appropriations that become necessary to maintain services. 12

20 Management Discussion and Analysis City of Clinton Amendments to the FY budget represent increases in intergovernmental and miscellaneous revenues resulting primarily from grants, debt proceeds, and capital opportunities. Expenditure amendments comply with statutory budget requirements and most increases are representative of projects associated with grants and purchase of new equipment. General Fund Revenues were $413,066 (4.8%) above the amended budget amounts. The General Fund expenditures were $337,795 or 3.5% less than the amended budget amount. Proprietary Funds. The City s proprietary funds provide the same type of information found in the government-wide statements but in more detail. Unrestricted net position of the Water and Sewer Fund at the end of the fiscal year amounted to $2,577,629. The total change in net position was $128,008. The change in net position in the Water and Sewer Fund is in large part the result of an increase of sewer surcharge and fire line fee revenues over original estimates. Capital Asset and Debt Administration Capital Assets. The City of Clinton s investment in capital assets for its governmental and business type activities as of June 30, 2016, totals $32,479,715 (net of accumulated depreciation and amortization). These assets include buildings, land, machinery and equipment, park facilities, vehicles, and infrastructure. Major capital asset transactions during the year include the following: Purchase of 2 garbage trucks increased governmental capital assets by $484,820 Various police and general government equipment, and motor vehicles increased governmental capital assets by $258,225 Various land, infrastructure, and improvements increased governmental capital assets by $476,454 Purchase of a tractor with a side mount mower increased governmental capital assets by $129,000. Various asset improvements increased business-type capital assets by $124,736 Replacement of utility lines through the community development block grant increase business-type assets by $783,726 Various equipment, vehicle, and infrastructure additions to business-type activities increased capital assets by $140,876 The disposal and surplus of major capital assets during the year include the following: Various equipment and vehicles decreased governmental capital assets by $493,

21 Management Discussion and Analysis City of Clinton Figure 7 City of Clinton s Capital Assets Governmental Activities Business-type Activities Total Land $1,446,733 $1,378,802 $316,947 $316,947 $1,763,680 $1,695,749 Buildings and other improvements 6,737,980 6,438,017 32,449 32,449 6,770,430 6,470,466 Intangible asset-brand 18,000 18, ,000 18,000 Construction in progress 66, ,227 2,715,453 2,793,648 2,782,447 2,919,875 Equipment 2,843,685 2,766,425 36,743,695 36,712,105 39,587,380 39,478,530 Vehicles and motorized equipment 6,011,144 5,651, , ,542 6,562,962 6,155,066 Infrastructure 8,313,015 8,262,437 4,236,347 3,327,886 12,549,362 11,590,323 Subtotal 25,437,550 24,641,432 44,596,711 43,686,577 70,034,261 68,328,009 Less accumulated depreciation and amortization 13,392,640 12,897,174 24,161,906 23,077,840 37,554,546 35,975,014 Total Net Capital Assets $12,044,910 $11,744,258 $20,434,805 $20,608,737 $32,479,715 $32,352,995 Additional information on the City s capital assets can be found in Note III.A.4 of the Basic Financial Statements. Long-term Debt. As of June 30, 2016, the City of Clinton has no outstanding bonded debt. The City s debt is comprised of State Revolving loans, USDA loans, and installment purchases. 14

22 Management Discussion and Analysis City of Clinton Figure 8 City of Clinton s Outstanding Debt Governmental Activities Business-type Activities Total Installment purchases 2,916,690 2,683,257 99, ,136 3,016,683 2,790,393 State Revolving Loan - - 1,584,606 1,841,285 1,584,606 1,841,285 Total $ 2,916,690 $ 2,683,257 $ 1,684,599 $ 1,948,421 $ 4,601,289 $ 4,631,678 City of Clinton s Outstanding Debt The City of Clinton s total debt increased by $30,389 (0.66%) during the past fiscal year. Governmental activity debt decreased by $233,433 (8.7%). Business-type activity debt increased by $263,822 (13.54%). As mentioned in the financial highlights section of this document, the City of Clinton currently does not have a bond rating as the City retired all bond-related debt during FY The City s most recent credit rating was A+ from Standard & Poor's and A3 from Moody's Investors and 82 from the North Carolina Municipal Council. This bond rating is a clear indication of the sound financial condition of City of Clinton. The City of Clinton maintains some of the highest financial ratings from all major rating agencies within its peer group. This achievement is a primary factor in keeping interest costs low on the City s outstanding debt. In April 2013, the City amortized its outstanding general obligation bonds. North Carolina general statutes limit the amount of general obligation debt that a unit of government can issue to 8 percent of the total assessed value of taxable property located within that government s boundaries. The legal debt margin for City of Clinton is $49,908,700. The City has no bonds authorized but unissued as of June 30, Additional information regarding the City of Clinton s long-term debt can be found in Note III.B.5 of this report. Economic Factors and Next Year s Budgets and Rates The following key economic indicators reflect the growth and prosperity of the City. The City has begun expansion of its water production facilities with a funding agreement with USDA for approximately $6 million to double the City s water production capacity to support growth. The City has begun the planning stage for expansion of the Wastewater Treatment Plant. The City has begun Phase 1A of the Royal Lane Recreation Master Plan. The City of Clinton is the commercial center of Sampson County and its strong agriculturally based economy, which traditionally remains stable relative to economic trends. The agriculture industry contributes over one billion dollars annually in the Sampson County economy. Sampson County has an unemployment rate of 5.2 as of September A bio-fuels company has chosen the City of Clinton and Sampson County as its location for its first North American facility. The company expects to begin construction in 2017 with a projected investment of $150 million and more than 65 full-time employees. 15

23 Management Discussion and Analysis City of Clinton The City is working with the Development Finance Initiative from the UNC School of Government to develop public-private partnerships to enhance community and economic development. A 72-unit apartment complex was completed in A 9-unit subdivision began construction in The North Carolina Department of Transportation has continued the construction and expansion of NC-24, which will provide uninterrupted, four-lane access between Fayetteville and Clinton, reducing travel time by as much as 30 minutes. The City of Clinton is located in close proximity to Ft. Bragg Army Base, Camp Lejeune Marine Base, and Seymour Johnson Air Force Base. Sampson County is part of the All-American corridor. Budget Highlights for the Fiscal Year Ending June 30, 2017 Governmental Activities: Ad valorem and sales tax revenues represent the largest portion of revenue resources for governmental activities. Sales tax revenues continued to increase in FY and the trend is expected to continue in FY with an increase of 15.10% represented in the FY16-17 budget. Total General Fund revenues budgeted for the fiscal year ending June 30, 2017 are $9,102,000. Budgeted expenditures in the General Fund are equal to budgeted revenues and are approximately 4.54% less than the amended FY15-16 budget. The largest expenditure function is public safety and the largest components are in employee compensation and benefits. Some key FY16-17 governmental budget highlights include: No change in the property tax rate of $.40 per $100 valuation. The expected revenue is $2,896,500 on a 97.8 percent collection rate. Sales Tax revenues account for $2,101,000. The residential garbage collection rate for FY16-17 is $15.50, which is the same as the previous year s rate. Residential garbage collection accounts for $590,000 in the FY16-17 budget and commercial collection accounts for $744,800. The cost of healthcare continues to be a factor in the cost of personnel management with the City experiencing a 4% increase in FY The City expects to spend approximately $225,000 on street paving and resurfacing. Business type Activities: The City estimates revenues of approximately $4.78 million from water and sewer enterprise operations in FY16-17, a 1.27 percent increase from FY15-16 due to a slight rate increase. The City is adjusting water and sewer rates by 0.5 percent to match the 2015 Consumer Price Index inflation rate. Some key FY16-17 business-type activity budget highlights include: Water and sewer charges, including bulk rate fees, account for $4,382,700 (92%) in the FY16-17 Water and Sewer Fund budget. Sewer surcharges charges based on the pounds of pollutants in excess of the normal amount account for $275,000. Direct department capital costs for Water & Sewer operations amount to 358,000; a decrease of 44.8% due to a decrease in capital improvements. Budgeted debt service stands at 505,700, an increase of 30.91% over FY16. 16

24 Management Discussion and Analysis City of Clinton Requests for Information This report is designed to provide an overview of the City s finances for those with an interest in this area. Questions concerning any of the information found in this report or requests for additional information should be directed to the Director of Finance, City of Clinton, PO Box 199, Clinton, NC The Clinton Finance Director can also be contacted by phone at or by at kstafford@cityofclintonnc.us. More information is available on the City of Clinton website 17

25 Basic Financial Statements

26 CITY OF CLINTON, NORTH CAROLINA STATEMENT OF NET POSITION June 30, 2016 EXHIBIT 1 ASSETS Governmental Activities Primary Government Business-type Activities Total Component Unit Current assets: Cash and cash equivalents $ 5,430,958 $ 2,828,797 $ 8,259,755 $ 649,871 Taxes receivables (net) 48,212-48,212 - Accrued interest receivable on taxes 6,682-6,682 - Accounts receivable (net) 195, , ,119 - Due from other governments 697,355 5, ,235 - Due from component unit 278, ,400 - Inventories 13,898 26,001 39, ,721 Prepaid items ,071 Other assets 25,319-25,319 - Restricted cash and cash equivalents 36, , ,879 - Total current assets 6,733,181 3,627,319 10,360, ,663 Noncurrent assets: Capital assets: Land, improvements and construction in progress 1,513,726 3,032,400 4,546,126 36,795 Other capital assets, net of depreciation and amortization 10,531,184 17,402,405 27,933,589 45,357 Total capital assets 12,044,910 20,434,805 32,479,715 82,152 Total noncurrent assets 12,044,910 20,434,805 32,479,715 82,152 Total assets $ 18,778,091 $ 24,062,124 $ 42,840,215 $ 909,815 DEFERRED OUTFLOWS OF RESOURCES 251,154 84, ,856 5,135 LIABILITIES Current liabilities: Accounts payable $ 417,934 $ 326,794 $ 744,728 $ 67,828 Distributions payable ,540 Accrued interest payable 40,764-40,764 - Due to other governments ,202 Long-term debt due within one year 704, ,824 1,023,912 - Liabilities payable from restricted assets: Customer deposits - 143, ,394 - Long-term liabilities: Net pension liabilty 318, , ,144 - Long-term debt - noncurrent 3,452,854 3,259,784 6,712,638 - Total liabilities 4,934,498 4,156,082 9,090, ,570 DEFERRED INFLOWS OF RESOURCES 215,642 71, ,523 20,666 NET POSITION Net investment in capital assets 9,128,220 17,341,234 26,469,454 82,152 Restricted for: Capital projects ,491 Stabilization by State Statute 1,128,222-1,128,222 - Economic development 97,219-97,219 - Public safety 15,354-15,354 - Planning grants USDA reserve 21,111-21,111 - Working capital ,555 Unrestricted 3,488,979 2,577,629 6,066, ,182 TOTAL NET POSITION $ 13,879,105 $ 19,918,863 $ 33,797,968 $ 568,380 The notes to the financial statements are an integral part of this statement. 18

27 CITY OF CLINTON, NORTH CAROLINA STATEMENT OF ACTIVITIES For the Year Ended June 30, 2016 Exhibit 2 Program Revenues Net (Expense) Revenue and Changes in Net Position Primary Government Operating Capital Grants Charges for Grants and and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Component Unit Primary government: Governmental activities: General government $ 1,596,886 $ 56,630 $ 90,980 $ - $ (1,449,276) $ - $ (1,449,276) $ - Public safety 3,510,690 18, ,130 - (3,314,439) - (3,314,439) - Transportation 1,198, ,926 - (938,299) - (938,299) - Economic and physical development 439,259 81, , ,000 20,319-20,319 - Environmental protection 819,568 1,385, , ,848 - Cultural and recreation 883,163 62, (820,419) - (820,419) - Interest on long-term debt 70, (70,022) - (70,022) - Total governmental activities 8,517,813 1,604, , ,000 (6,006,288) - (6,006,288) - Business-type activities: Water and sewer 4,722,046 4,656, ,304-80,416 80,416 Total primary government $ 13,239,859 $ 6,260,247 $ 707,436 $ 346,304 $ (6,006,288) $ 80,416 $ (5,925,872) $ - Component unit: ABC Board $ 1,880,147 $ 1,907,331 $ - $ - $ - $ - $ - $ 27,184 General revenues: Taxes: Property taxes, levied for general purpose 2,920,966-2,920,966 - Other taxes 45,528-45,528 - Unrestricted intergovernmental revenues 3,643,670-3,643,670 - Unrestricted investment earnings 14,212 9,117 23, Gain (loss) on sale of assets (23,722) - (23,722) - Miscellaneous Transfers: Total general revenues, special item and transfers - 38,475 38, ,600,654 47,592 6,648, Change in net position 594, , ,374 27,233 Net position - beginning, as previously reported 13,284,739 19,790,855 33,075, ,163 Restatement (13,016) Net position - beginning, restated 13,284,739 19,790,855 33,075, ,147 Net position - ending $ 13,879,105 $ 19,918,863 $ 33,797,968 $ 568,380 The notes to the financial statements are an integral part of this statement. 19

28 City of Clinton, North Carolina Balance Sheet Governmental Funds June 30, 2016 Exhibit 3 Total Total Major Fund Non-major Governmental General Funds Funds ASSETS Cash and cash equivalents $ 5,103, ,562 $ 5,430,958 Receivables, net: Taxes 46,189 2,023 48,212 Accounts 195, ,872 Due from other governments 696,143 1, ,354 Due from other funds Due from component unit 278, ,400 Inventory 13,898-13,898 Restricted cash and cash equivalents 32,431 4,054 36,485 Total assets $ 6,366,147 $ 335,032 $ 6,701,179 LIABILITIES Current liabilities: Due to other funds $ - $ - $ - Accounts payable and accrued liabilities 411,480 6, ,934 Total current liabilities 411,480 6, ,934 DEFERRED INFLOWS OF RESOURCES Beer and wine revenue receivable 9,582-9,582 Property taxes receivable 46,189 2,023 48,212 Total deferred inflows of resources 55,771 2,023 57,794 FUND BALANCES Non Spendable Inventories 13,898-13,898 Restricted Stabilization by State Statute 1,128,222-1,128,222 Economic Development in the Downtown Tax District - 97,219 97,219 USDA Reserve 21,111-21,111 Planning Projects Capital Projects - 177, ,409 Public Safety 11,320 4,210 15,530 Committed Cemetery Fund 338, ,599 Assigned Community Development - 47,717 47,717 Capital Use Policy 685, ,897 Subsequent year's expenditures Unassigned 3,699,849-3,699,849 Total fund balances 5,898, ,555 6,225,451 Total liabilities, deferred inflows of resources and fund balances $ 6,366,147 $ 335,032 $ 6,701,179 The notes to the financial statements are an integral part of this statement. 20

29 City of Clinton, North Carolina Balance Sheet Governmental Funds June 30, 2016 Exhibit 3 Total fund balances $ 6,225,451 Amounts reported for governmental activities in the statement of net position (Exhibit 1) are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the funds. Gross capital assets at historical cost 25,437,549 Accumulated depreciation and amortization (13,392,639) 12,044,910 Real estate acquired and held for sale is not a current financial resource and therefore is not reported in the funds 25,319 Deferred outflows of resources related to pension are not reported in the funds 251,154 Other long-term assets (accrued interest receivable from taxes) are not available to pay for current-period expenditures and therefore are inflows of resources in the funds. 6,682 Liabilities for earned revenues considered deferred inflows of resources in the fund statements. 57,794 Long-term liabilities used in governmental activities are not financial uses and therefore are not reported in the funds. Gross long-term debt - beginning (3,940,946) Long-term debt included as net position below (includes the addition of long-term debt and principal payments during the year. (215,995) Net pension liability (318,858) (4,475,799) Deferred inflows of resources related to pensions are not reported in the funds (215,642) Other long-term liabilities (accrued interest) are not due and payable in the current period and therefore are not reported in the funds. (40,764) Net position of governmental activities $ 13,879,105 The notes to the financial statements are an integral part of this statement. 21

30 City of Clinton, North Carolina Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the year ended June 30, 2016 Exhibit 4 Total Total Major Fund Non-major Governmental General Funds Funds REVENUES Ad valorem taxes $ 2,903,404 $ 53,970 $ 2,957,374 Other taxes and licenses 45,528-45,528 Unrestricted intergovernmental 3,644,483-3,644,483 Restricted intergovernmental 622, , ,104 Sales and services 1,458,986-1,458,986 Investment earnings 13, ,212 Miscellaneous 175,280 55, ,435 Total revenues 8,863, ,656 9,173,122 EXPENDITURES: Current: General government 1,525,213-1,525,213 Public safety 3,422,992 2,228 3,425,220 Transportation 1,521,575-1,521,575 Economic and physical development - 331, ,269 Environmental protection 1,193,822-1,193,822 Culture and recreation 981, ,769 Debt service: Principal 378, ,387 Interest 75,867-75,867 Capital outlay - 27,635 27,635 Total expenditures 9,099, ,132 9,460,757 Excess (deficiency) of revenues over expenditures (236,159) (51,476) (287,635) OTHER FINANCING SOURCES (USES): Sale of assets 25,513 81, ,461 Debt proceeds 611, ,820 Transfers to other funds (150,000) - (150,000) Transfers from other funds 25, , ,993 Total other financing sources (uses) 513, , ,274 Net change in fund balance 277, , ,639 Fund balances, beginning 5,637, ,990 5,809,883 Change in reserve for inventories (16,071) - (16,071) Fund balances, ending $ 5,898,896 $ 326,555 $ 6,225,451 The notes to the financial statements are an integral part of this statement. 22